What is the Personal Savings Allowance for 2026/27?

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The **Personal Savings Allowance (PSA)** was introduced in April 2016 and allows most UK taxpayers to earn some savings interest free of income tax each year. **2026/27 PSA rates:** | Taxpayer band | PSA | |---|---| | Basic rate (20%) | **£1,000** | | Higher rate (40%) | **£500** | | Additional rate (45%) | **£0** | The rate band that determines your PSA is your marginal income tax band — if you earn between £12,571 and £50,270, you're a basic-rate taxpayer and get the full £1,000. **How HMRC collects tax above the PSA:** Banks and building societies report interest paid to HMRC automatically under the **Common Reporting Standard**. HMRC then: 1. Adjusts your **PAYE tax code** to deduct extra tax from your wages or pension over the following year. 2. Asks you to pay via **Self Assessment** if the tax owed on savings exceeds £1,000 or you are already registered for SA. **Savings interest is now paid gross:** Since 2016, banks pay savings interest without deducting tax at source — unlike the old system where 20% was withheld. This means you must keep track of interest earned. **ISA as an alternative:** Cash ISAs and Stocks & Shares ISAs shelter interest and returns from tax entirely, with no limit on interest earned. The annual ISA allowance is **£20,000** in 2026/27. **Scottish taxpayers:** Scotland has its own income tax bands, but the PSA thresholds follow the UK basic/higher/additional rate definitions. A Scottish intermediate-rate taxpayer (21%) falls in the basic-rate category for PSA purposes and receives the £1,000 PSA. A Scottish higher-rate taxpayer (42%) gets the £500 PSA. **Starting-rate band for savings (£5,000 at 0%):** If your non-savings income (salary, pension) is below £17,570, you may also benefit from the **£5,000 starting rate** for savings income at 0% — sitting below the PSA and allowing interest-only income up to £18,570 to be completely tax-free.

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